TORONTO — The continuing rout on China’s main market prompted a worldwide sell-off Monday that sent North American markets into a tailspin in early trading before recovering somewhat by late afternoon.

The market’s benchmark S&P/TSX index plunged 768 points or 5.7 per cent in early trading, then rallied strongly before selling off again. In late-day trading Canada’s main index was down 310.51 points at 13,163.16.

It was the same story in New York, where the Dow Jones industrial average lost a breathtaking 1,000 points shortly after the open before regaining much or that ground, then faltering again to a still huge loss of 483.88 points at 15,975.87.

The broader S&P 500 index was down 64.19 points at 1,906.70 and the Nasdaq dropped 140.00 points to 4,566.04.

“Obviously there was a rush to get out the door and too many people trying to get out at the same time,” says Conrad Dabiet, a senior portfolio manager at Manulife Asset Management.

Dabiet said Monday’s market action reminded him of the flash crash that occurred on May 6, 2010, where U.S. markets dropped sharply — with computer algorithms and high-frequency trading worsening the losses — before quickly rebounding.

“It certainly felt like that again,” Dabiet said.

The Canadian dollar was among the currencies trading lower as the price of many of its natural resources fell amid concerns about the strength of China’s economy, the world’s second-largest. In afternoon trading the loonie was down 0.24 of a U.S. cent at 75.70 cents U.S., its lowest point since August 2008.

On commodity markets, the October contract for benchmark crude oil was down $1.43 at US$39.01 a barrel, while September natural gas was off a penny at US$2.66 per thousand cubic feet. December gold was down $5.80 at US$1,153.80 an ounce and September copper fell five cents to US$2.26 a pound.

China’s largest stock market, the Shanghai composite index, fell 8.5 per cent to close at 3,209.91 points, its biggest one-day loss since an 8.8 per cent decline on Feb. 27, 2007. That had a major spillover effect in Europe, where Germany’s DAX fell five per cent, the CAC-40 in France slid 5.6 per cent and Britain’s FTSE 100 dropped 4.5 per cent.

Underlying the gloom in China is the growing conviction that policy-makers and regulators may lack the means to stop the losses amid an economic slowdown, a banking system short of cash and investors pulling money out of the country.

“There is a lot of fear in the markets,” said Bernard Aw, market strategist at IG.

The panic has underscored the scale of the challenge for Chinese leaders in seeking to curb excess investment and guide the economy toward a more sustainable pace of growth.

“My biggest concern is that global growth momentum is very fragile,” said Rajiv Biswas, Asia-Pacific chief economist for IHS. “The most important step is to see China take further action to try to bring their economy to a seven per cent growth path.”